ICANN, VeriSign settlement challenged in California lawsuit

LOS ANGELES (Reuters) - A trade group of Internet businesses challenged a proposed settlement over control of the ".com" domain as a violation of US antitrust laws in a lawsuit filed on Monday in federal court in California.

The World of Domain Name Developers Inc, asked the court to stop the nonprofit body overseeing the Internet's addressing system -- the Internet Corporation for Assigned Names and Numbers, or ICANN -- from allowing VeriSign Inc. to maintain control of the lucrative ".com" domain until 2012.

That proposed deal reached in October settled a long-running dispute between ICANN and VeriSign and is expected to be finalized by the end of the year.

The lawsuit, which was filed in federal court in San Jose on Monday, said the proposed settlement violates federal laws against price fixing and creates a monopoly of the ".com" and ".net" domain name markets.

Plaintiffs' attorney Patrick Cathcart said the settlement fixes the price of registering any ".com" or ".net" far above market rates. He also said terms of the settlement guarantee VeriSign annual price increases at double the rate of inflation.

ICANN, which is based in Marina del Rey, California, could not be reached for comment while a spokesman for Mountain View, California-based VeriSign declined to comment on pending litigation.

The original dispute between VeriSign and ICANN arose after VeriSign introduced a new service called Site Finder in September 2003 directing Internet users who mistyped domain names like "www.example.com" to a VeriSign site that allowed consumers to choose from a list of alternative names. VeriSign planned to make money by selling advertisements on the site.

ICANN ordered VeriSign to temporarily shut down the service a month later after engineers said it could interfere with the stability of the Internet.

VeriSign then sued in February 2004, saying the Internet body had overstepped its authority and illegally restrained competition. The case was thrown out of US court in August 2004, but VeriSign refiled in California state court.

The two parties reached a proposed settlement in October in which VeriSign maintained control of the database of 35 million ".com" domain names until 2012. The contract would have otherwise come up for renewal in 2007.

VeriSign makes US$6 per year from each of the 35 million .com domain names in use. It also controls the .net domain, which contains nearly six million names.

The settlement also requires ICANN to review within 90 days new products or services introduced by VeriSign and its competitors that might affect the domain-name system.

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